Monday, April 4, 2011
How much would a mansion tax make house prices fall?
Sir, Some cautionary economics for the Liberal Democrats. If you impose a 1 per cent tax on houses worth more than Â£2m, either through council tax or a wealth tax, the discounted value of the liability is around Â£285,000 (assuming a 7 per cent discount rate). Do the Lib Dems really want the â€œhigh-endâ€ housing market, which includes much of the London market, to fall by 14 per cent? The unintended consequences could be much more profound than they might imagine.